Investors, UN panel call on Warsaw climate talks to support CDM

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LONDON, Oct 30 (Reuters Point Carbon) – Investors and the panel overseeing the U.N.’s carbon market for developing countries have called on delegates at next month’s climate meeting in Warsaw to rescue the ailing scheme, which the U.N. estimates has provided $315 billion in funding to low-carbon projects to date.

Papers tabled by the Executive Board of the Clean Development Mechanism (CDM) and the Project Developers Forum, a group that represents investors in the scheme, urged countries at the talks to agree measures to boost demand for the carbon credits created under the scheme, which at 50 cents each are valued near record lows.

Prices have slumped by 97 percent over the past five years due to a lack of demand globally, leading both bodies to repeat calls to governments to take action and save the scheme.

“The main challenge facing the CDM remains the low level of demand for the Certified Emission Reductions (CERs) … due ultimately to parties’ level of ambition to reduce greenhouse gas emissions,” the CDM’s board said in its submission.

The CDM was devised under the 1997 Kyoto Protocol to help industrialised nations meet the pact’s legally-binding emission targets more cheaply.

The board said the scheme has saved countries more than $3.6 billion in compliance costs over the past 12 years.

But the failure of nations to craft a new climate change deal to force emission cuts on the biggest emitters has left the market oversupplied, sending prices crashing and nearly bankrupting many of the companies that invested in projects.

Negotiators in Warsaw will seek to edge forward details of an international climate pact to be agreed in 2015 and to come into force after 2020.

The final deal will likely include new market-based mechanisms to allow the private sector to fund emissions cuts at the cheapest cost.

These could include bilateral agreements set up by Japan – where it exports clean technology in return for carbon credits – as well as carbon offsets approved for use in California’s emissions trading scheme.

But there is uncertainty about how the CDM would function alongside new markets.

In order to boost demand, the board and investors want nations without binding emissions targets to be able to use the credits to meet voluntary pledges.

Widening the accessibility of the scheme to all countries could help to ease the CDM’s transition into the new deal's regime, as it would already be playing a role in the CO2-cutting of poorer nations, the papers said.

NEW DEMAND

But with the new deal not likely to come into force until next decade, the Project Developers Forum is also seeking more immediate action to shore up demand for credits, and has called on negotiators to push for a CDM fund or reserve bank.

A June study by consultancy Vivid Economics suggested a fund of 200 million euros ($275.36 million) targeting new projects in poor countries would be enough to keep the scheme alive until the new treaty emerges.

The CDM’s executive and investors also called on the Green Climate Fund, a vehicle expected to help allocate $100 billion a year by 2020 to the world’s poorest countries to help them cope with climate change, to invest in the CDM because it has well-established rules to verify any emissions reductions.

“The CDM provides the world’s largest source of credible and internationally-accepted standards for measuring, reporting and verifying emission reductions,” the board said.

It warned that without support, the scheme could wither, making it harder for countries to meet their emissions reduction targets.

In the near 13 months from 14 Sept. 2012 to 27 Oct. 2013, the board said just 346 new projects applied for validation under the CDM, some 15 percent of the 2,276 projects that had joined the early stages of the scheme’s approval process a year earlier.

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